Las Vegas Sun

November 28, 2015

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Economic Report:

Economy starting to see recovery, albeit a slow one

UNLV analyst says full potential won’t be reached until 2017 despite growth in tourism, gaming


Associated Press File

A new UNLV report shows Las Vegas isn’t expected to fully recover from the economic downturn for several years.

Southern Nevada’s economy is continuing its slow crawl out of the recession, with tourism and gaming leading the way and real estate and unemployment continuing to be a drag on sustained growth.

Stephen Brown, director of UNLV’s Center for Business & Economic Research, said at a midyear Economic Outlook presentation Wednesday at the Venetian that it won’t be until 2017 before the economy returns to its full potential, giving credence to those who theorized that the Great Recession would be a lost decade.

Brown told the 200 in attendance that while Southern Nevada has the potential of having a record year for visitor volume in 2012, the 11.6 percent jobless rate and a construction industry that cratered to a level deeper than anyone had envisioned is keeping the region from firing on all cylinders.

He also said the state having the nation’s highest percentage of underwater homes and near-negative equity mortgages stands in the way of significant economic improvement.

“Our construction index is low by historic standards,” Brown said. “But there’s evidence that it’s coming off the bottom, but it’s a really deep bottom.”

Brown’s hourlong presentation was framed around effects of the world economy, U.S. economic conditions and details about why Southern Nevada is so slow to recover. Following the presentation, a panel of economic experts drilled further into specific regional issues confronting sustained growth for the area.

Brown said he doesn’t think the economic turmoil being experienced in several European countries would have a direct negative impact on Southern Nevada, nor would the slowing of Asia’s economy.

But domestically, the meltdown that disrupted relationships between financial institutions and investors and the uncertainty that resulted is making the U.S. recovery slower than anticipated. Rising energy costs have played a role, Brown said, but because Americans have been more fuel-efficient and it’s oil and gasoline, not natural gas, costing more that doesn’t create major concerns.

The Las Vegas unemployment rate stands at 11.6 percent, but Brown said it’s considerably higher — possibly as high as 23 percent — because so many people have quit looking for work, a phenomenon that is occurring nationwide.

Southern Nevada’s bright spot — its tourism and gaming industries — has shown sustained growth for about two years with visitor volume climbing at a faster pace than gaming. Brown said Clark County gaming revenue is rising at a rate parallel to U.S. gross domestic product, an indication that tourists are getting more comfortable with the idea of spending money when they vacation.

Las Vegas visitor volume could reach a record 40 million people. Brown said an analysis of taxi trips compared with visitor volume indicates a higher percentage of people are coming to the city by plane than are getting here from Southern California and other drive-in markets.

In the panel session, Bo Bernhard, executive director of UNLV’s International Gaming Institute, said concerns that Macau has surpassed Las Vegas as the top gaming revenue-generating destination in the world are overblown and that it was a foregone conclusion that Macau’s revenues would pass Southern Nevada’s eventually because of the volume of the nearby market. He said Las Vegas has withstood competitive pressures in the past and would do so again.

“When people come to Las Vegas, you don’t hear them say, ‘I’ve got to see the pinnacle (of the gaming world) at Macau,’” Bernhard said.

But there are many Asian players in Macau who want to make a trip to Las Vegas.

“Those baccarat numbers aren’t coming from Des Moines,” he said.

He added that the luxurious Marina Bay Sands in Singapore, operated by Las Vegas Sands, is a giant billboard for Las Vegas.

“I think overseas investments are coming back to Las Vegas,” Bernhard said. “Las Vegas will continue to be the intellectual capital of the gaming industry.”

On the housing front, home prices have fallen steadily since 2006 — which Brown said presents both misfortune and opportunity. While Nevada has the most underwater homes — an estimated 62 percent — lower housing costs will enable opportunities for new buyers as well as investors. Southern Nevada also has the nation’s best yields for rentals with an 8.55 percent return for investors.

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